"Gary Bode has just completed our tax returns for the first time and I am totally satisfied with his level of service. He has been very attentive, asked all the right questions, and not only fixed some problems from our previous accountant, but also set us up for future success through a thorough and professional analysis of our corporate structure in conjunction with several personal variables.Gary Bode, CPA: I actively look for red flags on Schedule C before E-Filing it. For a free phone consult, please call 399-2705.
Schedule C CPAs see a variety of interesting issues with small business owners. The IRS audits Schedule C more often than any other type of business. Clearly, accuracy is important.
Schedule C Tax Advice: A Common Trap
Include all your income on Schedule C, even if it is a cash business. Interestingly, when large corporations lie about revenue, they inflate it. Why? They need to attract investors and maintain lines if credit. As a Schedule CPA, I see folks who might be fudging the numbers and then go to the bank for a loan. Well, the banks use Schedule C to evaluate your company. Look to the future and don’t concentrate on just reducing taxes.
“Schedule C CPAs look for expenses that are there, but shouldn’t be, and, expenses that aren’t there and should be. Both raise red flags with the IRS.”
- Gary Bode, Schedule C CPA and tax accountant.
Expenses
Look over a blank Schedule C. It probably doesn’t reflect the way you think about your business. Read any of the QuickBooks postings on this website and you’ll see that a CPA sets up a chart of accounts that makes intuitive sense to the owner. Reducing taxes is just one managerial task. I suggest using those same intuitvely obvious categories on Schedule C. And then using them consistently year after year.
Schedule C CPA Tax Advice for Proactive Audit Prevention
We actively look for red flags. How? Schedule C CPAs compare the current tax return to prior year tax returns. Unusual changes raise red flags. We also look at the expense ratios of the current year’s tax return. On other business tax returns, like say Form 1120-S, the IRS or State require a Balance Sheet. This can explain unusual changes in the submitted tax figures. Since Schedule C doesn’t provide the opportunity of a Balance Sheet, CPAs provide a supplemental explanation to the IRS with the tax return. For example, say you bought $40,000 worth of equipment, but only had $65,000 of income. Red flag. A supplemental explanation might mention a loan you took out for $35,000, and a $5,000 gift from family. While the return probably raises the same initial red flag when analyzed by computer, it also sends Schedule C to a human because of the supplemental information. When a human reads the explanation the audit is circumvented.
“A good Schedule C CPA looks for red flags and proactively helps explain them away.”
We have a virtual office to accommodate long distance and international clients. Physically, we’re a Wilmington NC CPA firm. There are hundreds of posts on this website and I hope you read a few to get a feel for what we do and how we do it. For a free initial phone consult, please call (910) 399-2705.
